NAHAR BUILDERS LIMITED ,MUMBAI vs. PCIT -5, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI

BEFORE SHRI OM PRAKASH KANT, AM AND MS. KAVITHA RAJAGOPAL, JM ITA No.3390/Mum/2025 (Assessment Year: 2020-21)

M/s. Nahar Builders Limited, Office of PCIT, B-1, Mahalaxmi Chambers, Aayakar Bhawan, Vs. Bhulabhai Desai Road, Mahalaxmi, Mumbai – 400 020 Mumbai- 400026 PAN: AADCN8065A (Appellant) (Respondent) :

: Shri Vimal Punmiya, AR Assessee by Respondent by : Shri Amol Kirtane, CIT-DR

Date of Hearing : 12.02.2026 Date of Pronouncement : 27.04.2026

O R D E R Per Kavitha Rajagopal, JM:

This appeal has been filed by the assessee, challenging the order of the Learned

Principal Commissioner of Income Tax [‘Ld. PCIT’ for short] passed u/s. 263 of the

Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short)

2020-21.

has filed an application for condoning the delay along with an affidavit. On perusal of the

same, we deem it fit to hold that the assessee had “sufficient cause” for the said delay.

Delay is hereby condoned.

ITA No.3390/Mum/2025 M/s. Nahar Builders Limited 3. The assessee has raised the following grounds of appeal:

“1. On the facts and circumstances of the appellant case and under law, Ld. CIT erred in passing order u/s 263 of the Act without appreciating that order of AO was passed making extensive inquiries, verification allowing relief u/s 80IB(10) taking into account judicial decisions of higher authorities.

(a) The Ld. AO completed the proceedings u/s 143(3) allowing the claim after thorough application of mind on claim of deduction u/s 80IB(10)

(b) The Ld. AO considered the binding judicial decisions of appellant's own case for 10 years duly passed and completed by the Final Fact finding authority on merits of claim of deduction u/s 80IB(10)

(c) Mere filing of an appeal before the High court by the Department with pre- admission stage shall not render all orders of Higher Authority infructuous as the same was adjudicated by co-ordinate bench of ITAT while passing orders for A.Υ. 2013-14 to A.Y. 2017-18

The appellant craves leave to add, amend, alter, and/or withdraw any of the grounds appeal at the time of hearing.”

business of builders and development of property. The assessee had filed its return of

income for the year under consideration dated 10.02.2021 declaring total income at

Rs.10,54,48,810/-. The assessee’s case was selected for scrutiny through CASS for the

following reasons and notices u/s 143(2) and 142(1) of the Act were duly issued and served

upon the assessee:

“i. High ratio of refund to TDS ii. Large "any other amount allowable as deduction" claimed in Schedule BP of return iii) Large deduction claimed under section 801/805A/801B/801C as compared to Turnover

ITA No.3390/Mum/2025 M/s. Nahar Builders Limited

iv) Deduction from Total Income (Chapter VI-A) (Business ITR)

v) Large difference in the closing stock shown in Balance sheet and Trading and Manufacturing a/c of current year as per Return of Income.

vi) High liabilities as compared to low income/receipts

vii) Real estate business with high closing stock (Verify whether assessee has done correct accounting of income)

viii) Large difference in the opening stock of current year (in Trading & Manufacturing account) and closing stock of previous year (in Trading & Manufacturing account a/c as per Return of Income)”

AO” for short) passed the assessment order dated 29.09.2022 u/s 143(3) r.w.s. 144B of the

Act where the return of income of the assessee was accepted by the Ld. AO without any

variation. The Ld. PCIT invoked the revisionary powers u/s 263 of the Act stating that the

assessment order is erroneous and prejudicial to the interest of the Revenue for the reason

that the Ld. AO had allowed the claim of deduction u/s 80IB(10) of the Act, which provides

for 100% deduction on profits derived from developing and building housing projects

stating that the assessee has satisfied the condition where the built up area of each

residential unit shall not exceed 1000 sq. ft. in Delhi and Mumbai, whereas as per the Ld.

PCIT in assessee’s case the District Valuation Officer’s (“DVO” for short) report states

that the residential unit sold by the assessee during the relevant year was 1278.66 sq. ft.

which is beyond the mandatory limit of 1000 sq. ft. prescribed under the provisions of

section 80IB(10) of the Act thereby holding the assessment order to be erroneous in so far

as it is prejudicial to the interest of the Revenue to that extent. The Ld. PCIT vide order

ITA No.3390/Mum/2025 M/s. Nahar Builders Limited dated 04.02.2025 set aside the assessment order after considering the said issue thereby

directing the Ld. AO to pass the denovo assessment.

on the abovementioned grounds.

contended that the assessee has complied with the provisions of section 80IB(10) of the

Act where the built up area of the residential units sold by the assessee was below the

prescribed limit of 1000 sq. ft. Further, the Ld. AR contended that the Tribunal and the

first appellate authority in assessee’s own case for A.Y. 2013-14 to 2017-18 had decided

this issue in favour of the assessee where it was held that the flower beds which were below

the floor level, service areas and cantilevered structures were excluded from the built up

area as per section 80IB(10) of the Act. The Ld. AR argued that this view was taken

consistently from A.Y. 2008-09 to 2012-13 which was also reiterated in the subsequent

years. The Ld. AR further argued that during the scrutiny assessment the Ld. AO had

raised queries on the said issue for which the assessee had given a detailed submission

explaining the same and only after duly considering the assessee’s submission the Ld. AO

allowed the claim of the assessee. The Ld. AR further argued that this is not a case of no

enquiry conducted neither was it a case of inadequate enquiry by the Ld. AO but the Ld.

AO considered the assessee’s submission and had taken one of the plausible views and had

given relief to the assessee. The Ld. PCIT’s contention that the Revenue is in appeal before

the Hon’ble High Court challenging the order of the Tribunal does not hold waters and it

ITA No.3390/Mum/2025 M/s. Nahar Builders Limited will not make the assessment order erroneous in so far as it is prejudicial to the interest of

the Revenue.

controverted the same and stated that the issue has not attained finality as the appeal of the

Revenue was pending before the Hon’ble High Court for adjudication and the Ld. AO

ought to have disallowed the deduction claimed by the assessee for the reason that the Ld.

AO is the party before the Hon’ble High Court challenging the order of the Tribunal. The

Ld. DR relied on the order of the Ld. PCIT.

The issue before us is whether the Ld. PCIT was right in invoking jurisdiction u/s 263 of

the Act for the reason that the Ld. AO has allowed the claim of deduction of the assessee

u/s 80IB of the Act where it is alleged that the assessee has not fulfilled the condition where

the built up area of each residential unit shall not exceed 1000 sq. ft. in Delhi and Mumbai

for which reason the assessment order is claimed to be erroneous and prejudicial to the

interest of the Revenue. The contention of the Ld. PCIT is that the built up area includes

the carpet area plus the thickness of the walls and any covered projections such as balconies

or verandas more precisely as per the Maharashtra local government (DCR guidelines)

built up area includes the area covered by a building on all floors, including cantilevered

portions like balconies and projections, unless these are expressly excluded by regulations.

Since the residential unit sold by the assessee during the year under consideration consisted

of 1278.66 sq. ft. as per the DVO’s report the assessee was not entitled to the deduction

claimed u/s 80IB of the Act, thereby making the assessment order erroneous and prejudicial

ITA No.3390/Mum/2025 M/s. Nahar Builders Limited to the interest of the Revenue. The assessee’s contention was multi-folded consisting of

the argument that detailed inquiry was made by the Ld. AO during the original assessment

proceeding where the issue of eligibility of claim u/s 80IB of the Act was examined at

length by the Ld. AO who had initially rejected the assessee’s claim on the ground that the

built up area was more than 1000 sq. ft. Subsequently, the assessee’s submission that the

alleged agreements specified by the Ld. AO during the assessment proceeding pertained to

“Burberry Housing Project” and not “Mirabillis Project” where the built up area was above

1000 sq. ft. for which the assessee has not claimed deduction u/s 80IB(10) of the Act. The

claim u/s 80IB(10) of the Act pertains to “Mirabillis Project” which is duly reported in the

audit report in Form 10CCB where the built up area was below 1000 sq. ft. The Ld. AO

after considering the assessee’s submission allowed the assessee’s claim of u/s 80IB(10)

of the Act holding the assessee to be eligible for the said claim. This finding of the Ld. AO

is also categorically mentioned in the assessment order. The Ld. PCIT has failed to

consider this aspect that the assessee’s claim for deduction u/s 80IB of the Act was for a

different project which is said to be within the prescribed limit of 1000 sq. ft. Even

assuming that the built up area is more than 1000 sq. ft. considering the flower beds which

are below the floor level were not covered in the built up area in assessee’s own case for

A.Y. 2008-09 to 2012-13 by the co-ordinate Bench, against which the Revenue was in

appeal before the Hon’ble Jurisdictional High Court and subsequently decided in favour of

the assessee for A.Y. 2010-11 vide order dated 10.07.2025. In the finality of the issue by

the Hon’ble High Court and that the Ld. AO had taken the view which was upheld by the

Tribunal at the time of passing of the assessment order, in our view, cannot be held to be

prejudicial to the interest of the Revenue. There has been an application of mind by the

ITA No.3390/Mum/2025 M/s. Nahar Builders Limited Ld. AO and hence the assessment order cannot be erroneous, in a case where a detailed

inquiry was carried on during the assessment proceeding. It is a settled principle of law

that in order to assume jurisdiction u/s 263 of the Act the twin conditions that the

assessment order should be erroneous and prejudicial to the interest of the Revenue has to

be satisfied in all cases of revisionary proceeding. There is no iota of doubt that in the

present case the mandatory conditions for invoking revisionary powers are not satisfied for

which reason, we deem it fit to hold that the assumption of jurisdiction by the Ld. PCIT is

unwarranted and thereby set aside the order of Ld. PCIT. We, therefore, allow the grounds

of appeal raised by the assessee on the above observation.

Order pronounced in the open court on 27.04.2026

Sd/- Sd/- (OM PRAKASH KANT) (KAVITHA RAJAGOPAL) ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai; Dated: 27.04.2026 * Kishore, Sr. P.S. Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER,

(Dy./Asstt.Registrar) ITAT, Mumbai